#9 - Mohnish Pabrai Lecture Marathon, Joe Mansueto’s career, Morningstar Founder, and Launching OMD Daily
May 18, 2020: Learnings from going through Mohnish Pabrai’s lectures/Q&A at Boston College, Trinity College and London Business School. Learning about companies with exceptional management, why price matters, owner earnings, circle of competence, Mohnish’s 10 commandments for investing, deserving to manage outside capital and more. I also dig into Joe Mansueto’s fascinating career of founding Morningstar: The low-key billionaire inspired by Buffett.
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Episode Notes:
Mohnish Pabrai Lecture at Boston College (Carroll School of Mgmt) - November 7, 2019:
Mistakes will happen. You have to learn from it but you can’t let it mess with your head. You have to learn to move on. You have to get back to playing the game. Zinc Horsehead example.
Motherson’s unusual culture… always promoting to leadership from internal… they get paid to acquire companies by their OEMs like BMW…=> refers to his talk at Peking university. https://www.motherson.com/
CEOs: Look at the track record of what they’ve done as managers.
Fiat’s Sergio had a 8 year record with various case studies on how he is the kind of guy who can buy distressed assets. Look for the track record of the managers. Carlos Tavares at Groupe PSG Is like that too... Carlos gets suits off the rack, always travels coach… he can ’squeeze blood out of a rock’.
Best leaders want organizations to prosper over themselves.
Business Model > Geography: Some businesses transcend geography and currency… like the best credit rating agency in each country.
If you’re bullish on a stock… then it should be something like 5x at least right? Not some 30% return. => but this is indeed a good question to ask yourself.
Focus on owner earnings = Cash flow after capex needs.
Mohnish Pabrai speaks at Trinity College Dublin - February 21, 2019
Circle of competence => Expand it but don’t feel like you need to know everything. Over time, it comes down to identifying it and playing within it. You can ignore 80% of the market and still be fine. Buffett’s successes have been in levered institutions (financials) and media but not commonly in retail. John Templeton says the best analysts will be wrong 1/3 times and I think the big thing is the slugging % in combination with that assumed batting average. Because when Buffett is wrong, it doesn’t result in massive losses
Father was an entrepreneur as well. Lot’s of failures, especially from leverage. Interesting to hear his back story. When his businesses failed, Mohnish’s father would get a fortune teller to tell him how his next business was successful. Despite being a rational engineer. When Mohnish asked him about such a practice, his father said that sometimes… you just need a rope to climb out of that hole and even if you know you can’t predict the future… having a mechanism to pull you out from the depths so you can continue to play the game again is key. It’s kind of like what my mother told me about her religion.
Continuous talk about the South Korean market… it was something I felt strongly about in 2017 and it may very well still be a place of ample opportunity given how the KOSPI has only moved some 4% in 7 years. I think.
Opportunity is that business changes take years but prices/expectations change immediately. Markets punish unpredictability.
Price matters: if you bought Coke at 45x earnings in 2000s… you would’ve generated 2% in annual returns in its current price of 15x earnings now.
For career goals: Go direct. No need to make business plans to go from A to B to finally get to the promised land of C. As Warren says, don’t save sex for old age.
Be deserving of outside capital. You’re ready to be a wealth manager when you are already wealthy. Same case for Mohnish and Li Lu
https://www.youtube.com/watch?v=_0XPurSI9cQ&list=WL&index=3&t=0s
Mohnish Pabrai's Webcast Q&A Session with Students at London Business School
The 10 commandments from investing
1) No management fees. Take a 6%
2) No investing teams. Value investing is not a team sport
3) You’ll be wrong 1/3 of the time. At best. Accept this and focus on slugging %.
4) P/E of 1 companies. Price matters
5) Don’t use excel. Precision isn’t necessary.
6) Have a rope for times of despair
7) Focus. Circle of Competence
8 ) No shorting
9) No leverage
10) Copy the best. Clone.
Didn’t use DCF with Fiat investment. Looking for such no-brainers that DCF isn’t required. If you don’t use a DCF… then you have to become even more disciplined and stricter with your process because DCFs can be a means of arguing in your favour… people so are good at that.
https://www.youtube.com/watch?v=N0TwWxGxYs0&list=WL&index=5&t=0s